Why You Have To Believe In Yourself

Last week, we established that if safaricom declares sh21 billions in profits after tax, the PE ratio would be 9.52. that emerging market
telephony has an average PE of 17.00, therefore, the fair market price would be sh5/9.52 x 17 = sh8.928 per share. I congratulate Raj Bains,
who had the first correct answer. Now, we have to survey the landscape and take some other factors into consideration. the first issue
is whether the market is bullish or bearish. Perfectly good companies will struggle to make upside progress in a bear market. a rising tide (bull
market) tends to float a lot of boats. so we need to put a bias into the model. I have a dear friend and one of the best traders I know and when folk
ask him for investment advice, he responds, "It’s a bull market, don’t you know?" Many People are disappointed because he does not say
more than that but he is signaling a key consideration. the second consideration is the set up. Do buyers have the holding power? How is
the equation between buyers and sellers? It’s not rocket science. there are hundreds of markets all over Kenya. the bourse is no different. Let’s start
with Kenya retail, that’s you and me. are we all going to be ‘scalpers’ and ‘flippers’? Most People have taken short term loans; the year has been
tricky for all of us. It’s going to get a lot better but many folk will be biased towards booking a profit and flipping the shares quickly. We also have
foreign investors? are they going to be of the same mind set? and somewhere in the background, Vodafone might be lurking in the shadows.
I know if I was Mr sarin (Vodafone head) I would be thinking I need 16 per cent to put myself in the majority and I would be happy to pay a
premium for that 16 per cent so that I am finally in a majority and in charge. and this is where investing becomes more of an art than a
science. and the final factor is we need to study the tape, that is the share price from the day it starts trading. If you really want to maximise your returns
(and for many this is a very big outsized investment), you need to know the price at all times. It is going to make a very big difference if
you sell at 7, 8 or 10. If it trades sh10.00 and you are expecting your very kind broker to remember to call you, there is a fatal flaw in
your strategy. You need to be calling him or her and saying, ‘Its trading at sh10 , please sell my shares.’
Aly-Khan Satchu
www.rich.co.ke
is the author of
Anyone Can Be Rich